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Chapter 1: Introduction to Trade and Logistics

CHAPTER 1: INTRODUCTION TO TRADE AND


LOGISTICS
Objectives
The objectives are:

• Review the concepts of Logistics and Inventory Management


• Examine Logistics and Inventory features in Microsoft Dynamics®
AX 2009
• Determine the information flow in Microsoft Dynamics® AX 2009

Introduction
Introduction to Trade and Logistics provides an overview of Microsoft Dynamics
AX 2009 features in Trade and Logistics, which is the flow of purchase orders,
sales orders and inventory throughout a company.

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Logistics and Inventory Management


Logistics is defined as the process of planning, implementing, and controlling the
efficient and cost-effective flow, and storage of the following:

• Raw materials
• In-process inventory
• Finished goods
• Related information from the point of origin to the point of
consumption

Specifically, logistics helps companies meet customer requirements.

Inventory is the material and supplies a business carries either for sale or to
provide input in the production process. Inventory consists of many different
items held by the company, which can include:

• Raw materials and supplies


• Goods in production
• Sub assemblies
• Finished goods ready for sale

Inventory management is planning and controlling inventory from the raw


material stage to the customer. Companies must consider inventory at every
planning level.

Companies can manage inventory at both the aggregate level and the item level.
A company's management team must establish decisive rules about inventory
items including consideration of the following:

• The most important items to keep in inventory


• The control of items through a company
• The quantity of inventory to be ordered
• The timing of when an item should be ordered

Microsoft Dynamics AX manages the cost and quantities of the items bought and
sold. Regardless of whether a company is a retail business with merchandise
inventory or a manufacturing company with finished goods, materials, and work
in process, the system provides inventory from two standpoints: Physical and
Financial.

Logistics and Inventory Features


Microsoft Dynamics AX 2009 includes two types of inventory: physical and
financial. These inventory types include many dynamic features that help
companies keep status of the financial and physical value of their inventory, and
profits and improve customer service.

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Chapter 1: Introduction to Trade and Logistics

Additionally, the new mulitisite feature provides the Site dimension that helps a
company capture and reflect the movement and status of items between multiple
production or distributions sites.

Physical Inventory
Physical inventory is the physical movement, status and control of items
throughout the supply chain in a company. Specific features can help companies
control these items. These features include:

• Inventory tracking
• Master planning
• Automatic ordering
• Reservations
• Inventory transactions
• Quality management

Inventory Tracking

Inventory tracking tracks inventory items by using:

• Item ID
• Lot ID
• Configuration specifications, which can consist of the following
individual identifiers:
o Size
o Color
o Configuration
o Warehouse
o Site
o Batch number
o Location
o Pallet ID
o Serial number

Master Planning

Master planning calculates what is necessary to fill an order when it is received.


Master planning is covered in the Microsoft Dynamics AX 2009 Master Planning
course.

Automated Ordering

After calculating what is needed to fill an order, Microsoft Dynamics AX 2009 -


in cases of insufficient inventory - will automatically create production and
purchase order proposals to complete a customer request.

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Reservations

Microsoft Dynamics AX 2009 reserves items for sale or production. This puts the
items on hold and guarantees their availability for a specific order.

Inventory Transactions

When increases and decreases in inventory occur due to sales and purchase
orders, Microsoft Dynamics AX 2009 automatically updates inventory
information to reflect the actual levels.

Quality Management

Full integration for managing quality processes and non conformances on items
is provided in Microsoft Dynamics AX 2009. It helps manage, track and handle
quality processes and issues throughout a company.

Financial Inventory
Financial inventory is the financial value of a company's inventory. Specific
features can help companies keep track of the financial value. These features
include:

• Inventory value
• ABC Classifications
• Forecasting

Inventory Value

When companies use the most current information from all related modules in
the system, they can calculate inventory value at any time. Inventory costing and
evaluation is covered in the Microsoft Dynamics AX 2009 Inventory Costing and
Valuation course.

ABC Classifications

Companies can analyze which items are the most profitable from a sales
perspective, and consider the carrying costs (how long inventory remains in stock
and other factors) of the item(s) in inventory.

Forecasting

Based on the calculations that Microsoft Dynamics AX 2009 performs,


companies can produce sales and purchasing forecasts.

Companies can project future sales by using the statistics on quantities sold and
the company's own estimates.

From purchasing trends, a company can estimate its budget.

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Multisite
Supply chain management involves a highly interactive process of controlling,
planning, and implementing all the activities associated with moving goods from
the raw material stage to the end user stage, as efficiently as possible, with the
lowest cost and the highest quality.

Regardless of whether a company operates with a single production/distribution


site or multiple sites in different geographical locations, the system must capture
and reflect the elements that will enable optimal and appropriate decision making
and monitoring throughout the company.

Adding multiple site capability to Microsoft Dynamics AX 2009 therefore affects


all functional feature areas that support supply chain transactions that are relevant
to the various sites.

The following table provides an overview of how multisite functionality is


integrated into the various Inventory, Trade and Source feature areas. Some of
these features are covered as an integrated part of the topics in the Microsoft
Dynamics AX 2009 Trade and Logistics series.

Multisite Feature Area


Replenishment control by warehouse, for example, min / max and Inventory
standard quantity by warehouse
Preferred supplier by combination of item and warehouse / site Inventory
(currently item level only)
Replenishment logic across sites (basic modeling of Inventory
replenishment routes extended)
Decentralizing of pick, pack and ship (output orders) by Trade
facilitating a site grouping
• Sales order processing support with centralized order taking. Trade
• Static available to promise (ATP) logic across sites.
• Sales lines associated with one site (validate site – warehouse
relation).
• Method of delivery by sales lines.
• On-hand visibility extended with filtering by site.
• Ability to aggregate demand for each site or across sites by Source
supplier.
• Multiple ship to by line and site.
• Validate three way matching scenarios effect with site level
matching.
• Purchase order processing support / centralized purchasing.

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Information Flow
The Inventory management module is linked to related modules to provide an
efficient flow of information through Microsoft Dynamics AX 2009. The
information flow matches the inventory flow and provides lots of information
about the financial aspect of the process.

Ledger transactions and Inventory transactions are the backbones of Logistics.

Inventory information is linked to the following:

• Accounts Receivable
• Accounts Payable
• Master Planning
• Production
• Product Builder
• Human Resources
• Projects
• General Ledger

The Main form in Inventory is the Items form. It contains information about the
company's goods, services, and bills of material.

Similarly, the Accounts receivable, Accounts payable, and Master planning


modules also use the information that is stored in the Items form.

Summary
The Introduction to Trade and Logistics course reviewed the following:

• Concepts of Trade and Logistics, in addition to Inventory


Management
• Feature set of Microsoft Dynamics AX 2009 within the Trade and
Logistics area
• Information flow of Inventory Management in Microsoft Dynamics
AX 2009

The features within the Trade and Logistics area of Microsoft Dynamics AX
2009 will help companies keep track of the flow of purchase orders, sales orders
and inventory across all distribution and production sites; both physically and
financially.

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Quick Interaction: Lessons Learned


Take a moment and write down three key points you have learned from this
chapter:

1.

2.

3.

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